securities markets
broker markets and dealer markets, securities, can
The two segments of the secondary markets are____ ___ and ____ ___ . The primary difference between broker and dealer markets is the way each executes _______ trades. Securities trades ____ also take place in alternative market systems and on non-U.S. securities exchanges.
mutual funds
_____ _____ appeal to investors for three main reasons: They are a good way to hold a diversified, and thus less risky, portfolio. Investors with only $500 or $1,000 to invest cannot diversify much on their own. Buying shares in a this fund lets them own part of a portfolio that may contain 100 or more securities. These funds are professionally managed. These funds may offer higher returns than individual investors could achieve on their own.
equity
ownership in the issuing organization
regulate, states, state lines, federal
Both state and federal governments _____ the securities markets. The _____ were the first to pass laws aimed at preventing securities fraud. But most securities transactions occur across _____ ______, so _____ securities laws are more effective. In addition to legislation, the industry has self-regulatory groups and measures.
1933, full disclosure, registration statement, SEC, sold
Congress passed the Securities Act of ____ in response to the 1929 stock market crash and subsequent problems during the Great Depression. It protects investors by requiring_____ _______ of information about new securities issues. The issuer must file a ____ _____ with the Securities Exchange Commission (SEC), which must be approved by the ____ before the security can be _____.
profit
Corporations and governments raise capital to finance operations and expansion by selling securities to investors, who in turn take on a certain amount of risk with the hope of receiving a _____ from their investment.
global, buy, 60, NASDAQ , NYSE, London Stock Exchange, Tokyo Stock Exchange, NYSE, Europe, LSE, IPOs, interdependent, international
Improved communications and the elimination of many legal barriers are helping the securities markets go _____. The number of securities listed on exchanges in more than one country is growing. Foreign securities are now traded in the United States. Likewise, foreign investors can easily ___ U.S. securities. Stock markets also exist in foreign countries: more than __ countries operate their own securities exchanges. _____ ranks second to the ____, followed by the ____ ____ ____ (LSE) and the ___ ___ ____. Other important foreign stock exchanges include Euronext (which merged with the ____ but operates separately) and those in Toronto, Frankfurt, Hong Kong, Zurich, Australia, Paris, and Taiwan. The number of big U.S. corporations with listings on foreign exchanges is growing steadily, especially in _____. For example, significant activity in NYSE-listed stocks also occurs on the ____. The LSE also is getting a growing share of the world's _____. Emerging markets such as India, whose economy has been growing 6 percent or more a year, continue to attract investor attention. The Sensex, the benchmark index of the Bombay Stock Exchange, increased close to 40 percent between 2013 and 2017 as foreign investors continue to pump billions into Indian stocks.8 Why should U.S. investors pay attention to international stock markets? Because the world's economies are increasingly, ______, businesses must look beyond their own national borders to find materials to make their goods and markets for foreign goods and services. The same is true for investors, who may find that they can earn higher returns in ______ markets.
Black Monday, 508, circuit breakers, 2012, 7, 13, 20
In response to "____ ______"—October 19, 1987, when the Dow Jones Industrial Average plunged ___ points and the trading activity severely overloaded the exchange's computers—the securities markets instituted corrective measures to prevent a repeat of the crisis. Now, under certain conditions, ___ _____ stop trading for a 15-minute cooling-off period to limit the amount the market can drop in one day. Under revised rules approved in ____ by the SEC, market-wide circuit breakers kick in when the S&P 500 Index drops ___ percent (level 1), ___ percent (level 2), and __ percent (level 3) from the prior day's closing numbers.
Regulation FD, all, 2002,
In response to corporate scandals that hurt thousands of investors, the SEC passed new regulations designed to restore public trust in the securities industry. Itissued ____ ____ (for "fair disclosure") in October 2000. Regulation FD requires public companies to share information with ___ investors at the same time, leveling the information playing field. The Sarbanes-Oxley Act of ___ has given the SEC more power when it comes to regulating how securities are offered, sold, and marketed.
NASDAQ
National Association of Securities Dealers Automated Quotations; The first electronic-based stock market, this is a sophisticated telecommunications network that links dealers throughout the United States. This lists more companies than the NYSE, but the NYSE still leads in total market capitalization. An average of 1.6 billion shares were exchanged daily in 2016 through this market, which is now the largest electronic stock market. Its sophisticated electronic communication system provides faster transaction speeds than traditional floor markets. Examples include Amazon, Apple, Costco, Comcast, JetBlue, Microsoft, and Starbucks. The stocks of most commercial banks and insurance companies also trade in this market, as do most government and corporate bonds. More than 400 foreign companies also trade
10,000
On an average day, individual and institutional investors trade billions of shares of stock in more than ______ companies through securities markets.
1940, investment companies , 1940, background, 1970, $500,000
Other important legislation includes the Investment Company Act of ____ , which gives the SEC the right to regulate the practices of _____ ______ (such as mutual funds managed by financial institutions), and the Investment Advisers Act of _____, which requires investment advisers to disclose information about their _______. The Securities Investor Protection Corporation (SIPC) was established in _____ to protect customers if a brokerage firm fails, by insuring each customer's account for up to ______.
securities markets,
Stocks, bonds, and other securities trade in _____ _____. These markets streamline the purchase and sales activities of investors by allowing transactions to be made quickly and at a fair price.
insider trading,lax enforcement, 1988, insider
The 1934 act also banned ____ _____, the use of information that is not available to the general public to make profits on securities transactions. Because of _____ _______, however, several big insider trading scandals occurred during the late 1980s. The Insider Trading and Fraud Act of ____ greatly increased the penalties for illegal insider trading and gave the SEC more power to investigate and prosecute claims of illegal actions. The meaning of _____ was expanded beyond a company's directors, employees, and their relatives to include anyone who gets private information about a company.
1934, regulate, dealer markets, all participants, securities
The Securities Exchange Act of ____ formally gave the SEC power to______ securities exchanges. The act was amended in 1964 to give the SEC authority over the _____ _____ as well. The amendment included rules for operating the stock exchanges and granted the SEC control over ____ ______ (exchange members, brokers, dealers) and the ______ traded in these markets.
self regulation, FINRA, dispute resolution forum, investors
The investment community also regulates itself, developing and enforcing ethical standards to reduce the potential for abuses in the financial marketplace. The Financial Industry Regulatory Authority (______) oversees the nation's more than 3,700 brokerage firms and more 600,000 registered brokers. It develops rules and regulations, provides a investors_____ ______ ____, and conducts regulatory reviews of member activities for the protection and benefit of _______.
NYSE
The oldest and most prestigious broker market; has existed since 1792. Often called the Big Board, it is located on Wall Street in downtown New York City. lists the shares of some 2,400 corporations, had a total market capitalization (domestic and foreign companies) of $25.8 trillion at year-end 2016. On a typical day, more than 3 billion shares of stock are traded; It represents 90 percent of the trading volume in the U.S. broker marketplace. Major companies such as IBM, Coca-Cola, AT&T, Procter &Gamble, Ford Motor Co., and Chevron list their shares; Companies that list on here must meet stringent listing requirements and annual maintenance requirements, which give them creditability. also popular withnon-U.S. companies. More than 490 foreign companies with a global market capitalization of almost $63 trillion now list their securities; When an exchange member receives an order to buy or sell a particular stock, the order is transmitted to a floor broker at the company's trading post. The floor brokers then compete with other brokers on the trading floor to get the best price for their customers. In response to competitive pressures from electronic exchanges, they created a hybrid market that combines features of the floor auction market and automated trading. Its customers now have a choice of how they execute trades.
mutual fund
a financial-service company that pools its investors' funds to buy a selection of securities—marketable securities, stocks, bonds, or a combination of securities—that meet its stated investment goals. Each of these focuses on one of a wide variety of possible investment goals, such as growth or income. Many large financial-service companies, such as Fidelity and Vanguard, sell a wide variety of these, each with a different investment goal. Investors can pick and choose funds that match their particular interests. Some specialized funds invest in a particular type of company or asset: in one industry such as health care or technology, in a geographical region such as Asia, or in an asset such as precious metals. one of the most popular investments for individuals today: they can choose from about 9,500 different funds. Investments in these are more than $40 trillion worldwide, of which U.S. these funds hold more than $19 trillion. About 94 million individuals, representing 55 percent of all U.S. households, own these funds.
debt
a loan to the issuer
stockbroker
a person who is licensed to buy and sell securities on behalf of clients. Also called account executives, these investment professionals work for brokerage firms and execute the orders customers place for stocks, bonds, mutual funds, and other securities. Investors are wise to seek a broker who understands their investment goals and can help them pursue their objectives. Brokerage firms are paid commissions for executing clients' transactions. Although brokers can charge whatever they want, most firms have fixed commission schedules for small transactions. These commissions usually depend on the value of the transaction and the number of shares involved.
securities
are investment certificates that represent either equity or debt.
institutional investors
are investment professionals who are paid to manage other people's money. Most of these professional money managers work for financial institutions, such as banks, mutual funds, insurance companies, and pension funds. they control very large sums of money, often buying stock in 10,000-share blocks. They aim to meet the investment goals of their clients. they are a major force in the securities markets, accounting for about half of the dollar volume of equities traded.
the broker market
consists of national and regional securities exchanges that bring buyers and sellers together through brokers on a centralized trading floor. In this market, the buyer purchases the securities directly from the seller through the broker. These markets account for about 60 percent of the total dollar volume of all shares traded in the U.S. securities markets.
dealer markets
do not operate on centralized trading floors but instead use sophisticated telecommunications networks that link dealers throughout the United States. Buyers and sellers do not trade securities directly, as they do in broker markets. They work through securities dealers called market makers; A security transaction in this type of market has two parts: the selling investor sells his or her securities to one dealer, and the buyer purchases the securities from another dealer (or in some cases, the same dealer).
investment bankers
help companies raise long-term financing. These firms act as intermediaries, buying securities from corporations and governments and reselling them to the public. they advise clients on the pricing and structure of new securities offerings, as well as on mergers, acquisitions, and other types of financing. Well-known types of these banking firms include Goldman Sachs, Morgan Stanley, JP Morgan, Bank of America Merrill Lynch, and Citigroup.
individual investors
invest their own money to achieve their personal financial goals
exchange-traded fund (etf)
similar to mutual funds because they hold a broad basket of stocks with a common theme, giving investors instant diversification. These trade on stock exchanges, so their prices change throughout the day, whereas mutual fund share prices, called net asset values (NAVs), are calculated once a day, at the end of trading. Worldwide, these assets in 2016 were more than $3.5 trillion, with the U.S. these market accounting for 73 percent of the global market.5 Investors can choose from more than 1,700 of these that track almost any market sector, from a broad market index such as the S&P 500, industry sectors such as health care or energy, and geographical areas such as a particular country (Japan) or region (Latin America). these have very low expense ratios. However, because they trade as stocks, investors pay commissions to buy and sell these shares.
underwriting
the main activity of the investment banker, which acquires the security for an agreed-upon price and hopes to be able to resell it at a higher price to make a profit.
the primary market
where new securities are sold to the public, usually with the help of investment bankers. In the this type of market, the issuer of the security gets the proceeds from the transaction. A security is sold in this type of market just once—when the corporation or government first issues it.
the secondary market
where old (already issued) securities are bought and sold, or traded, among investors. The issuers generally are not involved in these transactions. The vast majority of securities transactions take place in these types of markets, which include broker markets, dealer markets, the over-the-counter market, and the commodities exchanges.
market makers
who make markets in one or more securities and offer to buy or sell securities at stated prices.
